Balance Ventures is Not a
Although Balance Ventures shares many
characteristics with hedge funds (e.g., performance-based
incentive compensation, limited partnership legal structures,
and exclusive representation of accredited investors),
Balance Ventures is not a hedge fund in the traditional
sense. While our target investments are not necessarily
correlated with or benchmarked against stock, bond or
foreign currency markets, neither do they function as
"hedges" against any particular exposure in
Management "Skin in the Game"
Balance Ventures actively pursues investment
opportunities where quality management is already in
place at a target company. We seek to maintain for management
an equity position in the company so that management
is both motivated toward, and appropriately rewarded
for, their actions that create value for equity shareholders.
We consider it a strength of the target company's management
if they already have a significant portion of their
own personal wealth invested in the business.
Preparing for Contingencies
Deal structures negotiated with target
companies usually include contingency provisions - in
anticipation of the undesirable and unlikely event that
the portfolio company underperforms - for Balance Ventures
to intervene in the daily operations of the business
and either to supersede the existing management team's
decisions or to replace all or part of the management
team. Balance Ventures, its investors, and portfolio
company management wish that such intervention never
happens. Therefore Balance Ventures will only intervene
with the occurrence of certain negative contingencies,
e.g., erosion of profitability, strategic or operational
failure, or fraud, negligence, distraction, or significant
incapacitation on the part of management.
Semi-Active Participation in Management
Balance Ventures does not intend
to become an active participant in day-to-day operational
decisions of the companies in its portfolio. The management
team's job and responsibility is to make such decisions.
Balance Ventures will contribute its resources to the
portfolio company's financial and operational strategy
and will actively work with its network of contacts
to enhance the company's operations by forging relationships
with new partners, suppliers, customers and, if warranted
by the company's growth, new management team members.